Government spending on PBS remains under control

Growth in government expenditure on the PBS in the year ended 30 September 2011 was 5.7%. After adjusting for inflation, this represents growth of approximately 2% in real terms. This is a sustainable level of growth, and existing arrangements such as price disclosure will ensure expenditure remains well under control. Further price reductions, unrelated to PBS Reforms, take effect from 1 December 2011 and a major round of PBS Reform price reductions is due to take effect on 1 April 2012. The April reductions will average 23% across more than 200 drugs.

Figure 2 – PBS growth is declining decade on decade

The ten year average growth in PBS in the last decade (2000-2010) was one of the lowest since the 1980’s. The Department of Health and Ageing Annual Report 2010-11 reported that in the year to 30 September 2011, PBS expenditure grew by 5.7%. The current growth rate reaffirms that the long term downward trend is continuing.

Figure 3 – PBS as a % of GDP remains stable

Over the last decade, PBS expenditure as a proportion of GDP has remained steady at between 0.6% and 0.65%.

Figure 4: PBS as a proportion of GDP – Actual vs Projected

Australia’s 2010 Intergenerational Report predicted that expenditure on the PBS will remain steady at 0.7% of GDP through to 2020. Already, actual expenditure in 2009-10 and 2010-11 was below the 0.7% of GDP forecast in Intergenerational Report 2010.